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Tesla Motors Inc (NASDAQ:TSLA) reached another record high yesterday -- this time touching $194.50 -- despite Toyota Motor Corporation's (ADR) (NYSE:TM) skepticism over the future of fully electric vehicles. Meanwhile, in the upstart automaker's options pits, traders set their sights on this Friday's close; in fact, no fewer than nine of the top 10 most exchanged options on Monday expire on Oct. 4. Occupying first and second place, respectively, were TSLA's weekly 10/4 190-strike put and 200-strike call. In both cases, it appears that most of the speculators were taking a neutral-to-bullish stance toward the underlying.
Diving into the details, we notice the majority of the put contracts went off at the bid price, suggesting they were sold at a volume-weighted average price (VWAP) of $3.58. Open interest added nearly 2,500 positions overnight, too, so we can conclude that the bulk of the contracts were sold specifically to open. In this case, the put writers will retain the entire premium received as long as TSLA -- currently seated at $192.48 -- remains above the strike through the closing bell this Friday. On the flip side, the traders risk being assigned if the stock sinks below the strike -- in which case, they could be forced to purchase the shares at $190 each, no matter how far they've descended.
With respect to the out-of-the-money call, the majority changed hands at the ask price, and open interest increased overnight, indicating they were bought to open at a VWAP of $1.82. Under this scenario, the speculators wouldn't be content if Tesla simply stayed put; rather, they need the shares to rise past $201.82 (strike price plus VWAP) before the options expire Friday afternoon. However, unlike the short put strategy -- where downside will continue to mount until the shares hit zero -- the maximum potential loss for these long calls is the initial premium paid. (Of course, with short interest on TSLA equaling 27% of its total float, it's also possible that yesterday's call buyers were actually short sellers picking up options-related protection.)
Although no one can predict the future, now appears to be an opportune time to buy Tesla Motors Inc (NASDAQ:TSLA) options. Schaeffer's Volatility Scorecard (SVS) for the stock stands at 92, which means the stock has generally made outsized moves during the past year relative to the price of its options.
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